Relevant Contracts Tax (RCT) is a tax deduction system in Ireland whereby a principal contractor:
- Deducts tax at 35% from payments to sub-contractors for whom he/she does not hold a relevant payments card (Form RCT47), on which the principal contractor records payments made without deduction of RCT, and
- Maintains a record of payments to all sub-contractors regardless of whether he/she holds a relevant payments card for them.
Relevevant Contracts Tax applies to the following industries:
- Construction operations
- Forestry operations
- Meat processing operations
Relevant Contracts Tax only applies where the principal contractor and sub-contractor operate in the same industry. For example, a meat processor who contracts a builder to construct or extend his meat processing factory need not operate RCT on payments to that builder. RCT does not apply to professionals such as architects, surveyors etc.
A principal contractor in the construction, forestry and meat processing industry is a person who takes on a sub-contractor and who:
- Carries on a business which includes the erection of buildings or the manufacture, treatment or extraction of materials for use, whether used or not, in construction operations
- Carries on a business of meat processing operations in an establishment approved and inspected in accordance with the European Communities (Fresh Meat) Regulations, 1987
- Carries on a business of meat processing operations in an establishment approved and inspected in accordance with the European Communities (Fresh Poultry-meat) Regulations, 1996
- Carries on a business of forestry operations* which includes the processing (including cutting and preserving) of wood from thinned or felled trees in sawmills or other like premises or the supply of thinned or felled trees for such processing
- Is connected with a company which carries on any of the above businesses
- Is a local authority or a public utility society
- Is a Minister of the Government
- Is a board established by or under Statute
- Carries on any gas, water, electricity, hydraulic power, dock, canal or railway undertaking
- Is a sub-contractor who sub-contracts all or part of the contract to a sub-contractor.
What is the difference between a sub-contractor and an employee?
- Employees pay tax under the PAYE system
- Self-employed sub-contractors pay tax under the Self Assessment system.
The category he/she falls into depends on what they actually do, the way they do it and the terms and conditions under which they are engaged, whether written, verbal or implied. It is not simply a matter of calling the job ‘employment’ or ‘self-employment’.